Private wealth targets Asian cities

Private investors were behind approximately a quarter of all global commercial property transactions in 2014, with Asian cities enjoying the benefits, according to Knight Frank’s ‘The Wealth Report 2015’.

According to the report, private investment in global commercial property deals amounted to an estimated US$153 billion in 2014, many funded by ultra-high-net-worth individuals (UHNWIs) fronted by a family-owned fund, company or private office.

“UHNWIs are now an important force in the commercial property world and are operating at all levels – prime, secondary, development and change of use,” said Matt Whitby, group director, head of Research & Consulting at Knight Frank.

The report includes global survey results that consider “where and what the super-wealthy are buying”.

“In terms of the cities that are consistently favoured by UHNWIs, Asian cities now make up four of the top 10 slots in Knight Frank’s ‘Global Cities Survey’,” said Neil Brookes, head of Capital Markets for Asia-Pacific at Knight Frank.

“The most intriguing battle remains between the region’s top two cities, as Hong Kong retakes third spot from Singapore in this year’s survey. Strengthened by its connections with mainland China and the sheer weight of Chinese capital on its doorstep, Hong Kong boasts a larger billionaire population than its South-East Asian rival.”

Brooks added, however, that Singapore, with its greater population of UHNWIs and “strategic position” in South-East Asia, “continues to diversify its economy and attract large multinational businesses”.

“Commercial property in both cities has been targeted by UHNWI investors looking for an income return and potential capital appreciation upside.

“Sydney is currently ranked 14th and will be nipping at the heels of Paris and Zurich by 2025,” Brooks said.

Knight Frank’s report included a survey of its capital markets teams globally to uncover “where and what the super-wealthy are buying”. The results revealed that UHNWIs continue to hold most of their property investments domestically, “but in the vast majority of the locations surveyed, wealthy private individuals have been increasing the amount invested overseas”.

“More peripheral markets such as Ireland and Spain are benefiting from this trend [and] Australia [is] attracting an increasing amount of Asian private investors and family money,” Knight Frank reported.

Whitby said UHNWIs are casting their eye beyond prime or trophy offices and retail space as a safe haven for their funds.

“They are prepared to look up the risk curve to non-core locations. This may mean moving outside a capital city’s CBD or fringe areas, where yields have become increasingly compressed, or heading into secondary cities where better value and higher returns are available,” he said. “Increasingly, for many UHNWIs, it also means investing overseas or looking at alternative property sectors.”

Overall, global commercial real estate sales volume increased by 7.5 per cent in 2014 to approximately US$619 billion. Whitby said global sales in commercial real estate are expected to rise by another 6 per cent in 2015.

To download the report click here

Knight Frank ‘Global Cities Survey’

Top 10 most important cities to UHNWIs
Ranking	2014	2015	2025
1	London	London	New York
2	New York	New York	London
3	Singapore	Hong Kong	Hong Kong
4	Hong Kong	Singapore	Singapore
5	Geneva	Shanghai	Shanghai
6	Shanghai	Miami	Beijing
7	Miami	Paris	Miami
8	Dubai	Dubai	Dubai
9	Beijing	Beijing	Paris
10	Paris	Zurich	Zurich

Source: ‘The Wealth Report 2015’, page 28

 

Hong Kong and Singapore battle for city supremacy

	Hong Kong	Singapore	Sydney	Melbourne
Global Cities Ranking 2015 (2014)	3 (4)	4 (3)	14	n/a
UHNWI population	2690	3227	765	456
Billionaire population	53	24	11	7
The amount (sqm) of luxury property that US$1m will buy	20	39	41	117

Source: Knight Frank, WealthInsight